Friday, May 11, 2018

I give the President great credit for shining his spotlight on the ridiculous place the U.S. finds itself over drug prices. They are way too high, the private market has proven incapable of dealing with it––PBMs have only made the drug market more opaque, and the biggest drug purchaser in the world, the U.S. government, has been politically unwilling to deal with it.

All while other industrialized countries have nowhere near the problem.

What is even more frustrating is to see an easy solution that has worked for years in these other industrialized countries that, rather than being a single-payer government-run solution, is as American-style free market as it could be.

Would any major U.S. corporation spend loads of money on procurement without first going out to bid on both price and performance? Would the Pentagon buy a new ship or aircraft system without going out to bid on both price and capability? Would the U.S. General Services Administration put up a new government office building without first bidding it out to determine which contractor would construct the best facility for the price?

So, if we are looking for market-based solutions to the high cost of prescription drugs, we need look no further than the government-run health care systems in France, Canada, Germany, the U.K., and others.

Rather than pointing the finger at these other nations that "pay too little" for their drugs and then condemn them for it, we might first recognize that they are out marketeering the United States.

These foreign bureaucrats are making American capitalists look like little leaguers when it comes to keeping drug prices under control!

What these other countries have in common is that they use a system called reference-based pricing. While there are differences among them, they generally use the market to set a reference price for each prescription drug that also takes clinical results into consideration––it could be the lowest price from a range of alternative drugs in a class (Italy), an average of all of the drugs in a class (Germany), or an average of a group of the lowest priced players (Spain). The health care system then pays no more than the reference price for a drug in the class no matter which pharmaceutical company the consumer and their physician decide to use.

In the end, the market sets the price and innovation is still rewarded by paying the price the most competitive player wants to charge.

In such a competitive bidding process prices and drug outcome results are completely competitive and fully transparent. If a patient and their doctor want to pay more for an alternative drug, because they think it will do a better job for a particular patient, they know all of the prices and the comparative clinical outcomes upfront. If a drug company is truly able to innovate for an existing class of drug, that drug could be placed in a new class––innovation is still rewarded.

The value of reference-based pricing is limited until there is more than one competitor in a class––drug companies are still rewarded for blockbuster breakthroughs.

But when more than one player comes to market in the same drug class, they compete based both on price and clinical outcomes.

Thursday, March 8, 2018

CIGNA just announced that it will buy pharmacy benefit manager (PBM) Express Scripts for $67 billion. In December, CVS said it would buy Aetna for $69 billion.

Already, UnitedHealth, through its Optum data technology
and OptumRx pharmacy benefit manager subsidiaries, has detailed health care utilization information on over 115
million consumers, four out of five hospitals, 67,000 pharmacies,
100,000 physician practices, 300 health plans, and government agencies
in 34 states and D.C.

Remember the good old days when we complained about the health insurance company oligopoly with just a few players controlling most of the market share in any given market?

We appear to be quickly on the way to a new and different kind of oligopoly controlling an even wider swath of the market with these new health care system aggregators being created.

Wednesday, January 31, 2018

I found it incredible that health care stocks tanked on Tuesday in response to an announcement from the Amazon, Berkshire Hathaway, and JPMorgan Chase CEOs that they were, as employer payers, going to become game changers in the health care market.

I have seen this movie before. Dozens of times over the last twenty-five years. The first time was when the leading employers in the Minneapolis-St. Paul market began the same effort in the early 1990s. That, and any other such initiative I have seen over the decades, went essentially nowhere.

But, this week, reporters were agog with the notion that these titans of business were going to wade in and change the health care world. After all, together these companies had a combined population of a million-people covered under their health benefit programs.

That is about as many people as Rhode Island and Delaware Blue Cross combined cover. So, I am not quite sure how these CEOs will bring a game changing critical mass to any provider bargaining table.

Thursday, October 19, 2017

The Alexander-Murray bipartisan
effort to stabilize the Obamacare individual insurance markets will not pass the Congress on its
own.

The only chance it now has is to
be added to a must-pass legislative deal, such as the one needed to fund the
government by the December 8th deadline in order to avoid a government shutdown.

Also sitting in the queue, and
certain to pass at some time, is the Children's Health Insurance Program (CHIP) reauthorization bill. The Congress is
currently struggling over the pay-fors for this reauthorization but there is
wide bipartisan agreement that it must be funded before the states start
running out of money, which will begin in a few weeks. CHIP now covers nine
million kids.

Conservative Republicans are
adamant that they do not want to pass an “insurance company bailout” bill like
Alexander-Murray. Particularly in the House, where Republicans were able to pass a "repeal and replace" bill, these members have already taken a controversial vote to cut Medicaid and insurance subsidy support and after that tough vote don't now want to have to explain why they have backtracked to "bail out" Obamacare with the Alexander-Murray short-term patch bill.

Sunday, October 15, 2017

By killing the cost sharing reduction (CSR) subsidies has Trump stopped what he has called an "insurance company bailout"? Or, has he created an unfunded mandate?

The
Obamacare statute requires the health plans to provide cost sharing
reduction subsidies to reduce the deductibles and co-pays in the
Obamacare compliant
individual health insurance market for those who make less than 250% of
the federal poverty level. It is a mandate. Funding a mandate is not a
bailout. In Washington, DC we call failing to fund a mandate an unfunded
mandate.

MICHEL MARTIN, HOST:
We have one more conversation about healthcare. As we just heard,
health insurers are trying to figure out what to do without the
[cost sharing reduction] reimbursement from the government that the Trump administration says
will no longer be paid. The question is, will insurers raise their rates
or withdraw from the health exchanges created by the Affordable Care
Act? For perspective on this, we called Robert Laszewski. He's a former
insurance executive who's now a health policy consultant. Mr. Laszewski,
thanks so much for speaking with us.

ROBERT LASZEWSKI: You're welcome.

MARTIN: So based on your knowledge of the industry, what are the
options that insurers are considering to deal with the lack of these
subsidies?

Wednesday, September 20, 2017

If you were a Republican Senator today, would you rather risk losing your Senate seat because the base was angry with your failure to pass an Obamacare repeal and replace plan, or because you did pass it but blew up the insurance system?

Wednesday, August 23, 2017

When Congress returns in September, Senate health committee chairman Lamar Alexander (R-TN) and ranking member Patty Murray (D-WA) will attempt to find a way to at least temporarily shore up the Obamacare individual health insurance markets.

First, they will try to guarantee the low-income cost sharing reduction (CSR) subsidies for at least a year in order to give participating insurers the confidence to charge rates that will often be 15% to 20% lower than they would otherwise have been. A good step that Democrats will have no trouble supporting.

But for there to be any chance that Republicans would support a stabilization bill, they will also have to get some concessions. The most likely concession to draw Republicans onside would be one that granted the marketplace more flexibility and a resulting better risk pool so that health plans could come up with better prices.

Opponents of this flexibility will argue that there is no free lunch. Plans with fewer benefits will cost less because they offer less.

Friday, July 28, 2017

The latest attempt by Senate Republicans to "repeal and replace" Obamacare––the “skinny” plan––failed early this morning on a vote of 49-51.

The deciding vote came from John McCain (AZ), joined by Republican Senators Collins (ME) and Murkowski (AK).

Trying to pass the “skinny” bill was a fool’s errand. How did McConnell think he was going to do any better bringing 240 House Republicans—including the Freedom Caucus—into a process that he could get no more than 45 Republican votes for in his own Senate?

Lindsey Graham (R-SC) had earlier said the “skinny” plan was a “half assed” bill whose only purpose was to keep what had been so far a horribly failed process alive—just before he voted for it.

Now what?

The focus now has to be on what will happen to the failing Obamacare exchange markets.

Will there be a bipartisan effort to shore them up?

I will suggest that there are two pre-conditions for any Congressional bipartisan solution:

Democrats will have to admit the problems with Obamacare are more than “imperfections”––they will have to admit that Obamacare has been a dismal failure for those who have no choice but to buy their health insurance in the individual health insurance market and make too much money to qualify for a subsidy––40% of American households make more than 400% of the federal poverty level, which is the cutoff point for subsidies.

Republicans will have to admit that most American households not eligible for Medicare, employer-based health insurance, or the pre-2014 Medicaid program, cannot afford to buy health insurance on their own—even if we had 2013 premium rate levels.

Wednesday, July 26, 2017

On Monday, Senate Republicans approved proceeding to debate on "repealing and replacing" Obamacare by a vote of 50-50-1, with Vice President Mike Pence casting the deciding vote.

Strike One
Yesterday, Senate Republicans failed to approve the bill they had been working on for over a month, which included the Cruz amendment that would have bifurcated the individual health market into separate healthy and sick pools. The vote was 43-57. Of course, all Democrats voted no. The nine Republicans voting against the leadership bill included Collins (ME), Corker (TN), Cotton (AR), Graham (SC), Heller (NV), Lee (UT), Moran (KS), Murkowski (AK), and Paul (KY).

Interestingly, West Virginia’s Capito, who had expressed lots of reservations about the Senate bill, did not vote against it.

The list of those voting no included both the most conservative and the most moderate. Both Maine and Kansas have not expanded Medicaid. Yet, Collins and Moran both voted no, at least in part, because of the impact the long-range caps on Medicaid would have on the large senior populations (nursing home payments) benefiting from the baseline Medicaid program in their states.

Lee and Paul voted no because the Senate bill didn’t go far enough to reduce the cost of insurance. Paul’s objective is complete repeal generally wanting to go back to 2013. Lee also wants a wide-open market.

The rest, in one way or another, just saw the Senate bill as leaving too much trauma in its wake, with the CBO estimating that 22 million fewer would ultimately be covered, and are generally are calling for a return to the "regular order" committee process and bipartisan negotiations with Democrats. The problem with that approach is that most of the 43 Republican Senators that voted for the bill want nothing to do with an agreement that makes Senate Democratic Leader Chuck Schumer happy.

All of this was made more complicated this week when the Senate parliamentarian ruled key provisions in the Senate bill out of order under budget reconciliation rules. These included the six-month lockout substitute for the individual mandate, association health plans, and going from 3:1 age rating to 5:1 age rating.

Strike Two
Repeal, with a two-year period within which to create a replacement, also failed, on a 45 to 55 vote. This time the Republican no votes included Alexander (TN), Capito (WV), Collins (ME), Heller (NV), McCain (AZ), Murkowski (AK), and Portman (OH).

The Last Attempt:
Now, McConnell will likely proceed to pass a “skinny” bill that only repeals provisions that arguably have unanimous support among Republicans: Repealing the medical device tax, the employer mandate, and the individual mandate.

His purpose is to just pass something that would keep this alive by having a bill to take back to the House for a conference. His hope is that he can ultimately hash out an agreement with the House. But that is nuts. The House bill is arguably even more conservative than the Senate bill. What makes McConnell think by bringing the Freedom Caucus back into these discussions that he can find a way to keep his moderate Republicans onside?

No one knows if this “skinny” strategy has 50 votes and won’t until the vote is taken.

Even if McConnell can pass the "skinny" option, I just can’t see a viable end game here for Republicans on their own.

There is also a zero chance of any kind of bipartisan agreement so long as a substantial majority of Republicans––as well as the Twitter in Chief––find a “bailout” of Obamacare unacceptable.

Let me also suggest that the Jeff Sessions fiasco has relevance here.

President Trump has said repeatedly that Obamacare is imploding. Any attempts now by the Secretary of HHS to administratively shore it up would likely put Secretary Price in the same boat that Attorney General Sessions is sitting in right now.

And, if we needed any more complications, the Anthem CEO’s comments this morning won’t help. He said, “We don’t believe we have been heard,” when referring to the largest Blue Cross carrier’s warnings to Congress and the administration about the precarious state of the individual health insurance market. He also said uncertainty over whether the $7 billion in low-income cost sharing subsidies would be paid by the Trump administration would lead to 20 points more in rate increases on top of the average 20% rate increases Anthem has already applied for. He also said that Anthem would consider getting out of more states if the Obamacare insurance exchanges aren't quickly stabilized.

Tuesday, July 18, 2017

Predictions that the individual health insurance market will now implode are misplaced.

First, in the wake of the Republican collapse of efforts to replace Obamacare, Medicaid will continue on unaffected. The Obama Medicaid expansion is fully funded for years to come. The nineteen states that did not take the expansion will continue to be on the outside looking in as their taxpayers continue to fund the expansion in the 31 states that did expand. And, health insurers will continue to enjoy that growth in their business as states continue to benefit from the open-ended federal funding.

The individual health insurance market will not collapse.

With about 3,000 counties in the U.S., I can't give you an absolute guarantee that there won't be a few that will not have an insurance carrier serving the Obamacare market in 2018. But generally, the vast majority of people eligible for subsidies will have at least one carrier to buy from.

The Kaiser Family Foundation is out with a recent study looking at medical loss ratios in the first quarter of 2017. They concluded that "individual market insurers on average are on a path toward regaining profitability in 2017."

I wouldn't go so far as to say that participating health plans will generally make money in 2017––the first quarter medical loss ratio is always better early on as consumers satisfy their ever-growing Obamacare deductibles.

But I do think 2018 could be a decent bottom line year for most Obamacare exchange insurers. And, 2019 should be just fine.

Thursday, July 13, 2017

A Cunning Strategy to Back Door Risk Pools and Market Segmentation

Ted Cruz has offered an amendment—since included in the latest Republican Senate draft—that would enable health insurance plans to offer stripped down coverage outside the current Obamacare compliant individual market. Anytime spent covered by them would be considered a break in service and subject the consumer to the six-month lockout provision should they want to get into the standard market. Carriers offering these plans could not deny pre-existing conditions but could up-rate sicker people.

Critics, including the health insurance industry trade associations, have come out against the idea because it would bifurcate the market into two separate pools—the healthier “Cruz pool” and the standard individual market subject to all of the current Obamacare consumer protections.

Washington Post's Wonkblog "Pundit of the Year"

Bob Laszewski was named the Washington Post's Wonkblog "Pundit of the Year" for 2013 for "one of the most accurate and public accounts" detailing the first few months of the Obamacare rollout.

"Top 5 Speaker on Health Care"

Bob Laszewski has been named a "Top 5 Speaker" on health care in a survey involving 13,000 business leaders, educators, association members, and others.

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Welcome To Our Health Care Blog!

The purpose of thishealth care blogis to provide an ongoing review ofhealth care policy activity in Washington, DC and the marketplace.

Health Policy and Strategy Associates, LLC (HPSA) is a Washington, DC based firm that specializes in keeping its clients abreast of the health policydebate in the nation's capital as well as developments inthe health care marketplace.

HPSA is not a lobbying firm. Our niche is objective non-partisan information on what is happening in the federal health policy debate and in the market.

Robert Laszewski, Washington, DC

Robert Laszewski is president of Health Policy and Strategy Associates, LLC (HPSA), a policy and marketplace consulting firm specializing in assisting its clients through the significant health policy and market change afoot.
Before forming HPSA in 1992, Mr. Laszewski was chief operating officer for a health and group benefits insurer.
The majority of Mr. Laszewski’s time is spent being directly involved in the marketplace as it comes to grips with the health care cost and quality challenge.